Can Tesla Keep Going? Report Expected to Reveal Company’s Health

It seems to me that the 2012 fourth quarter results are not as critical to determining the future of Tesla as this article suggests. The key factor is not how quickly Tesla can build cars, but how quickly it can sell them.

Suppose, for example, the fourth quarter results indicate that they were not able to achieve the production rate of 400 cars per week necessary to break even. This would mean that Tesla would need to seek some type of financing, and perhaps an organizational adjustment, in order to achieve that production rate. These are challenges, to be sure, but they can be overcome.

A far more serious question is whether or not they can attract 20,000 new buyers per year in order to support a sustained production rate of 400 cars per week. There is no solid evidence that they can, thus far. They have received 13,000 deposits of $5,000 towards the purchase of model S cars. These are not firm sales, as the depositor has the right, of course, to decline to take delivery and to have his deposit refunded. More importantly, once this initial pool of depositors has been served, either through vehicle deliveries or refunds, then it is not clear at all how many new buys will be attracted.

That is the real risk to the survival of Tesla. The point is that even if the fourth quarter results indicate that Tesla failed to achieve the necessary production rate, this does not mean that they are in serious trouble. Conversely, even if the fourth quarter results indicate that Tesla achieved the necessary production rate, this does not assure their survival.

12:30 pm February 11, 2013

NuMoo wrote :

@ James T

So in other words its still a "crap shoot"?

1:40 pm February 11, 2013

James Thurber wrote :

@NuMoo

Yup

4:56 pm February 11, 2013

Mark Kaskin wrote :

Not a very bright attorney paying a $5000 deposit to a company on the verge of bankruptcy. Good luck seeing any of that deposit back when they file for bankruptcy, hon. Who would take legal advice from such a chump?

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